For many Australians, university education is a stepping stone to a brighter future. But it usually comes with a HECS-HELP debt. As you transition from student to professional life and begin looking into home ownership, a question that typically comes up is ‘does HECS affect a home loan?’ And more to the point, how will it affect yours?
A HECS-HELP loan defers the upfront costs of your degree until your income is above the compulsory repayment threshold amount. When your income is high enough, it becomes compulsory to make repayments. Like any other loan, a HECS-HELP debt can impact your borrowing power.
As passionate home loan brokers in Brisbane, Time Home Loans has helped many potential home buyers navigate their home finance options and discover the right solutions. If you’re wondering ‘does HECS affect a home loan?’, we have some answers for you.
While HECS is a useful tool for students seeking to further their education, it can definitely have implications when you’re looking to secure a home loan. Here’s are some effects:
- Impact on borrowing capacity
One of the primary ways that HECS affects your home finance is by reducing your borrowing capacity. Lenders consider any existing debts you have when assessing your ability to repay a home loan. Does HECS affect a home loan like other debts? Yes. Although interest-free, a HECS debt is still a financial obligation that reduces your disposable income, affecting the amount you can borrow.
- Debt-to-income ratio
Lenders use your debt-to-income ratio to evaluate the state of your financial health. A higher ratio due to HECS can make lenders cautious, potentially leading to higher interest rates or even the rejection of your home loan application. To improve this ratio, home loan brokers often advise clients to manage other debts effectively.
- Monthly repayments
HECS repayments are automatically deducted from your salary once you earn above a certain threshold. These deductions can impact your monthly cash flow, influencing how much you can afford in home loan repayments. It’s essential to factor these repayments in when planning your home finance strategy.
- Credit assessment
While a HECS debt itself doesn’t appear on your credit report, its impact on your disposable income is considered during credit assessments. Lenders may view applicants with high HECS balances as higher risk, affecting their willingness to offer favourable terms.
Tips from Home Loan Brokers
Navigating the home finance landscape with a HECS-HELP debt is tricky but not impossible. Here are some tips from the seasoned home loan brokers at Time Home Loans:
Budget wisely
Plan your finances carefully, considering both HECS repayments and potential home loan costs. This will help you understand your true borrowing capacity.
Consult professionals
Engaging with Time Home Loans can provide valuable insights and strategies tailored to your financial situation, helping you secure the best possible loan terms.
Reduce other debts
Prioritise paying off high-interest debts to improve your debt-to-income ratio, making you a more attractive candidate to lenders.
Does HECS affect a home loan and your ability to secure one? In short, yes. While a HECS-HELP debt presents specific challenges to your ability to secure a home loan, understanding its impact and working with Time Home Loans can help you navigate the process more successfully. By managing your finances wisely and seeking professional advice, you can achieve your dream of home ownership despite student debt.
Explore home finance solutions with Time Home Loans
If you have a HECS-HELP debt or other complicated needs, Time Home Loans can help you navigate your own finance journey. A nationally accredited brokerage firm offering over 50 secure banks and lenders, we can provide competitive rates, fast approval and flexible borrowing options.
Your Time Home Loans journey won’t end as soon as you secure the loan either. We’ll continue to ensure you’re getting the best out of your home loan years after you take it out.
As home loan brokers, we stay on top of the many different types of loan out there in order to help you choose the product that best suits your needs. Your options include fixed, variable, split, interest-only and various other kinds of home loans, along with other services like personal and business loans. Working closely with financial planners and insurance specialists, we take a holistic approach that’s flexible, unique and 100% focused on your needs as a client. Whether you’re hunting for a home loan or already have one, we’re always looking out for the best deal for you.
Whether you’re seeking a definitive answer to the question “does HECS affect a home loan?” or you’re ready to sit down and have a discussion about your home loan journey, Time Home Loans is here for you. To find out more, book online to make an appointment with a member of our team.
Related: borrowing power calculator · first home buyers
Frequently asked questions
No. HECS-HELP is collected through the tax system and isn’t reported to credit bureaus, but lenders ask about it and see repayments on your payslip.
Not always. Using savings to clear HECS can reduce your deposit. Compare the extra borrowing power against the deposit you would lose before deciding.
No. Lenders differ in how they treat the repayment, especially if the debt is close to being repaid. A broker can compare lenders for you.
